Supporting Community Proposals to Upgrade NEAR Tokenomics: Halving Inflation and Introducing Rewards to Support Small Validators and veNEAR Holders

Building on five years of mainnet success, from achieving a fully sharded blockchain to facilitating multi-billion dollar volumes, NEAR is now entering its next major growth phase. In the past 30 days alone, over $1 billion in volume has flowed through NEAR Intents, NEAR’s groundbreaking cross-chain transaction infrastructure. NEAR Intents is also powering the first-ever ZEC on Solana connection—Zolanear—providing the cross-chain liquidity layer for privacy-preserving assets across the multichain economy. 

With the upcoming nearcore upgrade, the launch of the House of Stake governance platform, and powerful new AI products on the horizon, NEAR is now focused on enhancing its tokenomics, strengthening incentive alignment, and ensuring sustainable growth across the ecosystem. To advance NEAR’s continued evolution, we are summarizing and supporting a three-part community proposal to enhance to NEAR’s economics, consisting of a protocol upgrade and two reward programs: 

1. Halving Upgrade: Reduce NEAR’s maximum annual inflation to 2.5% for more sustainable tokenomics
2. Proposal – HSP-002: Support smaller validators to ensure network decentralization
3. Proposal – HSP-003: Increase rewards for veNEAR holders to reward early governance participation

The Evolution of NEAR Economics

NEAR’s original economic system was designed over five years ago before mainnet launch and was built for the network’s needs at the time, which involved bootstrapping the cryptoeconomic security for a novel sharded blockchain architecture. NEAR has since undergone significant protocol upgrades, including the rollout of a stateless validation security model, which has eliminated the need to reward actors for monitoring and ensuring the security of shards. While network optimizations have led to 10x more efficient gas prices and storage staking costs, they have also reduced the expected burn rate and impacted validator incentives. 

One of the NEAR ecosystem’s core values is creating economic opportunity for as many ecosystem actors as possible: we are determined to evolve NEAR’s economics in response to our rapidly maturing ecosystem. Moreover, with House of Stake officially live on mainnet, NEAR now has a more robust governance structure than ever before to align incentives across our ecosystem. NEAR token holders can enter the House today and stake their NEAR to participate in governance.

Below is a summary of three enhancements to NEAR’s tokenomic model and incentive design proposed by the community to help ensure the protocol’s long-term success. NEAR Foundation’s role in this process is facilitative, providing research and communications support for community-led proposals being discussed through House of Stake governance.

Halving Upgrade: Reducing NEAR’s Maximum Inflation

NEAR Foundation—alongside a wide array of ecosystem members including NEAR One, Aurora, RHEA Finance, Metapool, LiNEAR, and Hot_DAO—supports the proposal to directly launch a protocol upgrade binary to reduce NEAR’s maximum inflation from 5% to 2.5%. This upgrade will not be effective until 80% of stake of block producing validators choose to adopt it. Read the version 2.9.0 release notes for more details on mainnet node upgrades. 

This initial halving upgrade is a principles-driven and adaptive approach to maintain sustainability of issuance around the NEAR token, while also laying the foundation for a long-term and more systematic inflation strategy. Ultimately, this NEAR Halving marks a new chapter for the NEAR ecosystem and introduces a more sustainable token model that better serves the protocol during its latest phase of productization and real-world usage. This upgrade is based on community feedback and an initial vote across the entire NEAR ecosystem. Going forward, House of Stake will play a critical role in the decision-making process around the economic parameters for the NEAR ecosystem. 

Our rationale for the upgrade is as follows:

1. The current 5% rate, originally designed to accelerate early-stage participation, now introduces unnecessary dilution. At the same time, it reduces the incentive for holders to engage in DeFi and other productive activities within the NEAR ecosystem.
2. The initial community-based voting proposed by Hot_DAO has already gathered an overwhelming 91% pro from those who were able to vote. (Many validators operated by exchanges and funds refrained from voting due to compliance reasons.)
3. There will not be any forking of NEAR Protocol because such an upgrade will not be effective until the threshold has been reached.

Halving Impact: Inflation will be reduced to ca. 2.5%. Staking rewards will accordingly change to 4.75% assuming 50% of the total supply remains staked. This more sustainable inflation model may encourage greater on-chain participation in the NEAR ecosystem. 

Why Now? This is the right moment for NEAR to transition toward a sustainable and competitive inflation model. Each month under the current framework adds millions of new tokens to circulation, creating unnecessary supply growth given the relatively low level of fee burning today. 

While NEAR’s initial inflation rate helped bootstrap an active validator set, the network today has over 300 high-quality validators and uses stateless validation to improve cost-efficiency. The original 5% inflation rate now over-subsidizes security relative to network risk. Additionally, with new sources of fees in NEAR ecosystem like NEAR Intents and future AI products, it’s important to balance inflation paid out to token holders with sustainable rewards to achieve a positive flywheel effect.

This proposal directly addresses a core economic concern and follows the precedent of several major blockchain ecosystems, bringing NEAR in line with a healthier, leaner, and more sustainable inflation rate, one that reflects both current network realities and future ambitions.

To support this transition, MetaPool, LiNEAR, HOT_DAO, and Gauntlet have proposed two complementary programs designed to boost returns for the NEAR community for them to continue thriving in this new era of abundance.

HSP-002: Support Smaller Validators to Ensure Network Decentralization

Proposal Summary: Dedicate a total annual House of Stake budget of 100,000 NEAR to support validators, with assessment and distribution made at the end of each quarter (25k initial budget)

Once the proposed inflation reduction takes effect, validator rewards will decrease by roughly 50%. While large validators can absorb the reduction, smaller, independent validators may struggle, potentially leading to consolidation and reduced network decentralization. Network decentralization is vital for NEAR’s security and resilience, as a diverse validator set prevents single points of failure. This proposal aims to support smaller validators during this transition, ensuring their continued contribution to network security and decentralization.

The validator support program will operate on a quarterly cycle, with performance reviews and adjustments at the end of each period to ensure continued alignment with network conditions. 

For the initial version during Q4 2025, the proposal is the following:

1. Quarterly Payout: Each qualifying validator would be eligible to receive an additional 150 NEAR per quarter (3 months), distributed at the end of the quarter.
2. Eligibility: The 100 smallest validators by staked amount, who maintain at least 97% uptime on average over three months will qualify. Snapshots will be taken at the start and end of each quarter to determine eligibility.
3. Exclusions: Validators already receiving incentives from other NEAR Foundation, Linear Protocol, or Meta Pool programs may not be eligible to avoid overlap and ensure fair distribution. 

Please view the full proposal at https://gov.near.org/t/hsp-002-validator-support-program/41687. Note that this proposal is contingent on NEAR Protocol successfully reducing its inflation to 2.5%. 

HSP-003: Increased Rewards for veNEAR holders to reward governance participation

Proposal Summary: A 3-month rewards program, with a House of Stake budget of 280,682 NEAR, for veNEAR holders to boost governance participation in the House of Stake, modeling an estimated annual reward boast of 4.2%-4.5% on top of staking rewards, contingent on participation in House of Stake.

veNEAR (vote-escrowed NEAR) is a governance token that allows NEAR holders to participate in House of Stake governance through a stake-weighted, time-locked mechanism. By locking LiNEAR, stNEAR and rNEAR tokens users receive veNEAR. The longer the lock duration, the greater the voting power received. This aligns incentives for long-term commitment and active participation.

To encourage early participation in House of Stake, the following rewards program is proposed to boost returns for veNEAR holders. This rewards structure is designed to encourage long-term participation and ecosystem alignment, especially after inflation reduction becomes effective.

3-Month Pilot Reward Structure

Month 1: Launch Incentive

• Stake target in House of Stake: 10M NEAR
• Anticipated reward rate of 7.5% p.a. (subject to participation levels) on first 10M NEAR locked
• Estimated monthly rewards: 62,500 NEAR
• Rationale: Strong launch incentive to drive initial adoption

Month 2: Dynamic Scaling

• Stake target in House of Stake: 30M NEAR
• Reward rate calculated as: Rewards_APY = 198 / √(NEAR_supply) = 3.6%
• Estimated rewards: 90,374 NEAR

Month 3: Continuation of Dynamic Scaling

• Stake target in House of Stake: 60M NEAR
• Reward rate: 2.6% (using dynamic formula)
• Estimated rewards: 127,808 NEAR

The dynamic formula is derived from research conducted by Gaunlet on comparable staking ecosystems and aims to keep rewards broadly aligned with comparable on-chain opportunities, while preventing excessive dilution as adoption scales. Reward values are modeled for illustration and may vary based on total participation and network parameters.

Note: This proposal assumes HSP-002 has been approved and implemented. While not a technical dependency, HSP-002 addresses the validator economics that result from inflation reduction, ensuring the broader tokenomics package maintains network security. While this proposal covers only the initial 90-day period, the full proposal contains plans for future phases: https://gov.near.org/t/hsp-003-venear-holder-rewards-program/41688/1. 

Sustaining NEAR’s Growth for the Long Term

With its exponential momentum around Intents and pioneering suite of AI products, NEAR is uniquely positioned to power not only significant cross-chain volume but also a multi-trillion dollar onchain AI economy. NEAR’s Halving Upgrade and proposed reward programs are designed to strengthen NEAR’s tokenomics to fully capitalize on this once-in-a-generation market opportunity and ensure the health of the protocol for the long term. 

You can play an active role in the future of NEAR’s economics through House of Stake, now live on mainnet. Join House of Stake today to discuss the proposals, stake your NEAR, gain governing power, and receive rewards for contributing to the protocol. At House of Stake, everyone has a stake in the future of NEAR. 

Disclaimer: By accessing this site or participating in House of Stake governance or any related smart contract activity, you acknowledge that you do so entirely at your own risk. Nothing on this site constitutes investment, legal, financial, accounting, or tax advice. Participation outcomes are not guaranteed, and token values may fluctuate or result in complete loss. You are solely responsible for understanding and complying with all applicable laws in your jurisdiction, including determining, reporting, and paying any taxes arising from your participation.